The concept of having to pay councils a large bung for planning permission is well established in England and Wales under Section 106 agreements under the 1990 Town & Country Planning Act and more recently the Community Infrastructure Levy, introduced by the Planning Act 2008. But in Scotland different rules apply.
The Supreme Court yesterday ruled in favour of Elsick Development Company Ltd in its case against Aberdeen City and Shire Strategic Development Planning Authority.
Elsick had applied for planning consent to develop approximately 4,000 houses together with commercial, retail and community facilities at Elsick, near Stonehaven, Aberdeenshire
The local authority sought to compel Elsick to make a financial contribution to a pooled fund to be spent on infrastructure as a condition of the planning approval.
The Court found that it had no powers to do so.
Elsick argued that the local authority was acting contrary to the guidance of Scottish ministers on planning obligations and that the contribution they were being asked to make to the pooled fund was out of all proportion to the demands its development would make on the local infrastructure.
Lord Hodge, in dismissing the local authority’s appeal against an earlier decision by the Inner House, said: “If planning authorities in Scotland wish to establish a local development land levy in order to facilitate development, legislation is needed to empower them to do so.”
The judgment can be found at: www.supremecourt.uk/cases/docs/uksc-2016-0157-judgment.pdf
Planning expert at legal firm Pinsent Masons, Gary McGovern, said: “This was a high profile and important case in a financial sense. On the one hand it has the potential to affect the scale of contributions developers are liable to pay from a range of developments across the authority area, and on the other, to curtail the monies received by the authority to invest in strategic transport infrastructure interventions.
“In this case, the impact of the development on the infrastructure for which the contributions were sought was trivial and too remote to be a relevant to the development in question and form the basis of a planning obligation. This echoes many previous UK court decisions on the scope of planning obligations.
“The outcome had to some extent been pre-empted by the Scottish government's clear signal of intent to include a power on the face of the imminent Planning Bill enabling the introduction of an infrastructure levy in Scotland.
“In this regard, the Scottish government will note the Supreme Court found that if there are seen to be merits to a ‘local land development levy’ system, legislation is required to implement such a system, as we have seen already in England and Wales in the form of the Community Infrastructure Levy. The decision of the Supreme Court essentially follows conventional planning wisdom and to that extent was largely predictable.”
Pinsent Masons partner Craig Connal added: “The re-assertion and re-emphasis of traditional rules linking requirements with the individual scheme is to be welcomed, in part because any weakening of its rigours runs the risk of parties – on either side – bending or trying to bend the rules by which all are otherwise compelled to play on level playing field, especially where the stakes may be high enough to persuade parties to take a line of least resistance.
“Views can legitimately differ on the merits of a regional or national infrastructure levy – some will say it makes for certainty and cuts cost, others that it is unfair by making a developer pay for something which is nothing to do with their development at all. The proper place for that debate is in legislation where the boundaries and constraints of any scheme can be debated.”